All Forum Posts by: Jean G.

I can add some information from my perspective:

- we go after NPLs on commercial properties, instead of residential. I actually thought that there was less competition in commercial that in residential, so I appreciate @Chris Seveney's comment

- we buy our loans directly from banks and most banks want par when there is significant equity in the property (which are the types of notes we go after)

@Jay Hinrichs, you are correct that the NPLs are the problem.

I have spoken to my local banks in several state with whom I have 5-10 years relationships, and they don't do this (neither for performing nor non performing loans). It went pretty high up in some cases, and they decided they had no interest.

i have then spoken to banks who do these guidance lines for HMLs, but they will only do performing, not non performing (the fact that I am offering an interest reserve for as long as they seem necessary does not help).

I did end up finding 2 of the larger ones that finance HMLs, that actually have the product I need for NPLs, but their guidance line sizes start at 20 and 25 million respectively, and you need to be up to 50 million within a year, which is too large for me at this stage.

Hence why I thought of finding hard money lenders (those that use their own capital, and not guidance lines that will not allow NPLs) to see if I can interest anyone, as I know that most HMLs are sitting on capital and not writing enough loans at the moment. And I think that like someone said above, these loans could end up being pretty safe for them from an LTV standpoint compared to regular bridge loans.

Jean

My company purchases non performing loans from banks secured by commercial real estate with high equity. We then liquidate these loans, and do it again.

Is there any bridge lender here who would be interested in discussing providing leverage against these assets, so we could buy more of them in parallel and scale up?

How this would typically look for you as lender, is:

- You would loan 70 to 80% of our purchase price of each individual loan which would have you sit below 50% LTV against the collateral property. Sometimes much lower. We regularly come across loans at 25% LTV where you would then be sitting under 20% LTV against the collateral

- Typical loan duration is 2 to 8 months

- Typical individual loan amount in the $400k to $800k range

- Majority of assets that fit our criteria seem to be in Texas at the moment. Other states could include CA, AZ, UT, NV (I know that one is tough for most lenders). Typical asset is located in a suburban areas with low crime and growing population.

- All collaterals are CRE, no residential. Typical assets could be retail shopping center, medical office, flex, free standing restaurant, daycare. Rarely any specialty properties unless the metrics are extremely attractive.

- Your direct security would be in the form of a "collateral assignment" that is recorded against the APN and basically puts a lien against the deed of trust that we are the beneficiary of. During a payoff transaction of our loan insured by a title company (sale or refi of the collateral property), the title company would not clear title without paying off your loan to release the security assignment recorded against the collateral.

If we manage to obtain direct title to the property through foreclosure or deed in lieu, your security turns into a normal deed of trust (like a normal loan that you make every day).

- We can build an interest reserve into your loan to provide additional security, so from your point of view it's sort of a performing asset

Loans could be done on an asset by asset basis, or in the form of a guidance line with strict criteria that you define.

We have active deal flow for the above.

Please message me if you're able to help with this unique lending requirement.

My company purchases non performing loans from banks secured by commercial real estate with high equity. We then liquidate these loans, and do it again.

Is there any bridge lender here who would be interested in discussing providing leverage against these assets, so we could buy more of them in parallel and scale up?

How this would typically look for you as a lender, is:

- You would loan 70 to 80% of our purchase price of each individual loan which would have you sit below 50% LTV against the collateral property. Sometimes much lower. We regularly come across loans at 25% LTV where you would then be sitting under 20% LTV against the collateral

- Typical loan duration is 2 to 8 months

- Typical individual loan amount in the $400k to $800k range

- Majority of assets that fit our criteria seem to be in Texas at the moment. Other states could include CA, AZ, UT, NV (I know that one is tough for most lenders). Typical asset is located in a suburban areas with low crime and growing population.

- All collaterals are CRE, no residential. Typical assets could be retail shopping center, medical office, flex, free standing restaurant, daycare. Rarely any specialty properties unless the metrics are extremely attractive.

- Your direct security would be in the form of a "collateral assignment" that is recorded against the APN and basically puts a lien against the deed of trust that we are the beneficiary of. During a payoff transaction of our loan insured by a title company (sale or refi of the collateral property), the title company would not clear title without paying off your loan to release the security assignment recorded against the collateral.

If we manage to obtain direct title to the property through foreclosure or deed in lieu, your security turns into a normal deed of trust (like a normal loan that you make every day).

- We can build an interest reserve into your loan to provide additional security, so from your point of view it's sort of a performing asset

Loans could be done on an asset by asset basis, or in the form of a guidance line with strict criteria that you define.

We have active deal flow for the above.

Please message me if you're able to help with this unique lending requirement.

I have opportunities to purchase non performing loans secured by CRE at low LTV through relationships with banks. The strategy is to purchase the loan, immediately foreclose on it, then liquidate the collateral to harvest the equity for investors. I am working on an opportunity currently involving a property in Texas where we can return an IRR between 28 and 80% to investors with an exit between 2 and 7 months and good profit for the GP as well.

My strength is on sourcing and executing the deals. I am looking for someone to partner with that would handle the capital raising side.

The goal longer term would be to create a fund where we can cycle investor capital from one deal to the next and provide a high return for everyone.

if you are an experienced fundraiser who is lacking deal flow, would you kindly contact me by PM to discuss?

You could start by being a co-GP on this one deal, and then become a partner in the fund we are creating.

Thank you.

Jean

@Chris Seveney thank you for taking the time to reply. We own multiple commercial properties in our portfolio across several states (both local and not local), that we self manage, so that part I am not worried about at all. I find commercial properties easier and more fun to manage than residential ones.

Hello, I have been seeing increasing opportunities recently to bid on non performing notes on commercial properties that banks are trying to offload.

These notes usually have the following characteristics:

The note has reached maturity several months ago. Sometimes a year or two ago. Presumably the borrower is unable to refinance at current rates.

The borrower may or may not be making payments on the note, even though it is past maturity (is it a problem to foreclose if they are making payments?)

The notes are all on commercial properties (office, warehouse, shopping center, mixed use or sometimes multifamily)

The properties are either vacant or occupied by tenants, not owner occupied

The property value is usually higher than both the UPB and the legal balance, sometimes significantly higher than the

Now it is important to mention that I have very little experience with issuing notes and buying performing notes. No experience with non performing notes.

My idea is to buy these notes with the primary goal of accessing the property through foreclosure, knowing that there are several other possible outcomes. This is what I think I know:

- The borrower can choose to pay off the note at any time (by selling the property or just paying off the loan with other funds), so it is important that the legal balance covers my investment and some profit

- The borrower could file bankruptcy (can someone confirm that this will only cause delay, but not jeopardize ultimately collecting the legal balance of the note)

- Most of these DOTs will have a rent assignment clause, so I could try to enforce that and collect rents from tenants (essentially manage the property) while I am holding the note and trying to foreclose. Does anyone have any input on why this may not work, as it seems to not be a common thing for the banks to enforce.

- I could be successful with foreclosure and end up owning the property

- Since the note has reached maturity, it cannot be made to perform again by the borrower where I am stuck with it for years. There will be a resolution, one way or another, say within 6 to 24 months

Please feel free to comment on anything above that does not make sense.

Now my main question is: how are such notes valued? What is the seller typically expecting to sell these for, considering that the UPB and legal balance are lower than the property value?

In one instance I was told that the seller was expecting 92 to 94% of UPB, which was in that scenario equivalent to a 85% LTV, and I thought this was too high for the amount of risk and unknown involved.

I would love to be buying these around 50 to 60% LTV but don t know if that s realistic currently?

If the legal balance is already at 60% LTV for example, would a seller expect a higher amount than the legal balance possibly? Which would mean you loose money of the borrower immediately pays off, so not good at all. Just trying to understand what sellers expectations are.

Thank you for any pointers including things I may be missing.

So you have done with with an underlying USDA loan and it has not been immediately called?

We are planning to transfer it to a land trust, yes.

Roberto, yes, I can pull from a line of credit to pay it off with short notice if needed. Do you have any statistics for me on what the likelyhood is for a USDA loan to be called versus any other agency?

Hello,

we have the opportunity to buy a relatively new home that would make a great rental through a subject-to transaction / wrap. The underlying note is a USDA loan at 3% interested.

The interesting part is that there is about $60k of equity in the home after paying the entry fee.

One of my title companies is refusing to insure the transaction due to the underlying lender being USDA, and telling me that it is a bad idea to do this on a USDA loan. I'm sure I can find a different title company that will insure if needed.

I am looking for feedback from people that buy a lot of subject-to properties. What do you do when the underlying lender is USDA? What is your ratio and timeframe, for the loan to be called? Do they always and all get called? Or do they only sometimes get called?

In our situation, if the loan gets called it doesn't seem like it would be a huge problem, as we could just pay it off and the list the property and get the equity (probably $30k to $40k after selling expenses, assuming the market hasn't dropped).

Thank you in advance for any feedback anyone is able to provide on the subject of a subject-to sale with a USDA loan.

Jean